Celgene Corporation (CELG) reported fourth-quarter 2014 earnings of 88 cents per share (including stock-based compensation expenses and tax adjustments), in line with the Zacks Consensus Estimate. The company’s earnings were 64 cents per share in the year-ago quarter. We note that figures have been adjusted to reflect the two-for-one stock split.
Including stock-based compensation expenses, Celgene’s earnings climbed 33% year over year to $1.01 per share in the reported quarter.
Total revenues climbed 19% year over year to $2.1 billion in the fourth quarter. Revenues were boosted by the impressive performance of Revlimid. Net product sales climbed 19% year over year to $2.05 billion. Revenues were in line with the Zacks Consensus Estimate.
The company’s full year earnings (including stock-based compensation expense and tax adjustments) were $3.26 per share, up 22.7% year over year and in line with the Zacks Consensus Estimate. Revenues came in at $7.67 billion, up 18% year over year and marginally above the Zacks Consensus Estimate of $7.66 billion.
Quarter in Details
Net sales of Revlimid, the key growth driver at Celgene, came in at $1.3 billion, reflecting an increase of 16% over the year-ago period. The drug did well both in the U.S. (up 20%) and international markets (up 11%). Market share gains and increased duration of therapy drove sales in the reported quarter.
The drug is approved in many countries across the globe in combination with dexamethasone for treating multiple myeloma (MM) patients who have received at least one prior therapy. Revlimid is also approved in the U.S. in the relapsed refractory mantle cell lymphoma indication.
Revlimid is also available in many countries for treating transfusion-dependent anemia due to low or intermediate-1-risk myelodysplastic syndrome (MDS) associated with a deletion 5q cytogenetic abnormality (with or without additional cytogenetic irregularities).
Celgene is looking to expand the drug’s label. For this purpose, it has filed regulatory applications in the U.S. in the newly diagnosed MM indication. The FDA target date is Feb 22, 2015.
Net sales of another cancer drug, Abraxane, climbed 17% year over year to $236 million. Net sales of Vidaza declined 8% year over year to $154 million. Lackluster U.S. sales (down 67%) due to generic competition hurt results during the quarter. U.S. sales of another oncology drug Pomalyst came in at $132 million, up 11.9% sequentially. The drug gained FDA approval in Feb 2013.
The approval of the drug (trade name: Imnovid) in the EU was gained in Aug 2013. Sales of the drug in international markets were $70 million in the fourth quarter of 2014 compared with $63 million in the preceding quarter.
Newly approved Otezla sales in the fourth quarter were $47 million. The FDA has cleared the drug for the treatment of adult patients with active psoriatic arthritis (Mar 2014) and for the treatment of patients with moderate-to-severe plaque psoriasis who are candidates for phototherapy or systemic therapy (Sep 2014).
All other product sales (inclusive of Thalomid, Istodax and an authorized generic version of Vidaza in the U.S.) came in at $93 million in the fourth quarter, down 5.1%.
Research and development expenses (excluding stock-based compensation and other special items) increased 3.9% to $478 million. Selling, general and administrative (SG&A) expenses (excluding stock-based compensation and other special items) increased 19.8% to $479 million. Costs associated with the launch of Otezla and Abraxane for pancreatic cancer pushed up SG&A costs.
Outlook for 2015 Maintained
Celgene reaffirmed the guidance provided by it on Jan 12, 2015. The company expects adjusted earnings for 2015 in the range of $4.60–$4.75 per share (excluding stock-based compensation expenses). Net product sales for 2015 are expected to be approximately $9–$9.5 billon, up 22.3% year over year.
Foreign exchange translations are expected to impact revenues negatively by $100 million. Net sales of oncology drug, Revlimid, the key growth driver at Celgene, are projected in the range of $5.6–$5.7 billion, reflecting an increase of 13.5 % year over year.
The Zacks Consensus Estimate for 2015 is $3.26 per share on revenues of approximately $9.3 billion.
Celgene expects 2015 to be dominated by news related to its pipeline and label expansion efforts.
Celgene maintained its view for 2017 as well. The company continues to expect adjusted earnings for 2017 to be approximately $7.50 per share. Net product sales for 2017 are still forecast in the range of $13–$14 billion.
Celgene also provided a detailed outlook for 2020. The company projects net product sales of $20 billion for 2020. Moreover, adjusted earnings per share for 2020 are expected to be approximately $12.50 per share. Hematology franchise, Oncology franchise and Inflammation & Immunology franchise are expected to generate revenues exceeding $14.8 billion, $2.2 billion and $3 billion, respectively.
Our Take
We are pleased with the continued growth in Revlimid sales. Newly launched Otezla also looks promising. We expect Celgene to easily achieve its 2015 guidance driven by its strong product portfolio.
Currently, Celgene carries a Zacks Rank #1 (Strong Buy). Other well-ranked stocks in the health care sector include Alexion Pharmaceuticals (ALXN), Regado Biosciences, Inc. (RGDO) and AMAG Pharmaceuticals, Inc. (AMAG). Alexion and Regado carry the same rank as Celgene, while AMAG carries a Zacks Rank #2 (Buy).
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